Ethanol: T2 resumes rise as TTF natgas futures firm

22 Nov 2022

Quantum Commodity Intelligence - Spot T2 ethanol barges resumed their rise by the Tuesday close as TTF natural gas futures rebounded to a near one-month high while liquidity on the swaps picked up.

A front end dated (Nov 25-29) ethanol barge traded on the offer at €819/cu m by the close.

At the same time, a mid-window (Nov 29-Dec 3) dated barge was bid at €778/cu m while the back end (Dec 3-7) was bid at €817/cu m.

Quantum assessed the spot €39 higher at €821.75/cu m, reflecting the FE traded level and taking into account the contango structure.

Gains on the front of the paper curve were sharper compared to the physical, with the December contract starting the day at €815/cu m to end at €859/cu m, up €49.

The Jan/Feb spread narrowed from -€25 to -€20, with Jan valued €31 higher at €881/cu m and Feb rising €21 to €901/cu m by the London close.

A condor spread between the Q1/Q2 and the Q3/Q4 spreads was cleared after the MOC closed at -€65, which valued the former spread at -€40 and the latter at +€25.

After easing on Monday, spot ethanol prices restarted their upward move on Tuesday, supported by firmer natural gas prices, and as they continued to recover from a 14-month low of €694.75/cu m hit last Monday.

The December TTF contract jumped over 7% to €124.50/MWh, its highest since mid-October, while January rose nearly 9% to €133/MWh.

After months of debating, the EU proposed introducing a price cap of €275/MWh on natural gas prices for the bloc to protect businesses from rising energy prices, a move described as "not that helpful" by one market player.

Despite the higher gas prices, theoretical production margins for ethanol rose along the curve on the back of higher ethanol and weaker grain prices, with margins from April onwards now back in positive territory.

The spot margin basis corn futures rose to -€60.50/cu m, with the one basis wheat calculating to -€128.50/cu m.

T2 Ethanol FOB ARA

Bids: MW at €778/cu m, BE at €817/cu m

Offers: none

Trades: FE at €819/cu m